Young & Unemployed? —Try Day Trading
The economy isn’t so hot these days and jobs are hard to come by. This is especially true for young, recent graduates. If you find yourself without a job, you might be wondering what to do with yourself. You can return to school or teach yourself a new skill, but that further delays the day you can start making money. For those who are intelligent, quick-witted and open to taking a risk, day trading is one great option for making money from anywhere. You get freedom and flexibility, though the risks are high. If you’re interested in day trading, use the information below to get started.
What is Day Trading?
Day trading is the act of buying and then selling a stock, futures, or options all in the same day. Day traders make a profit by leveraging large amounts of trading capital. This allows you to take advantage of small changes in price to make a profit.
Who Can Day Trade?
Anyone with Internet access and some starting trading capital can make money as a day trader. Unfortunately, these days the initial trading capital required is more than it used to be. Recent regulations require you to have at least $25,000 deposited with your brokerage in order to start trading securities. The limit is less for futures however, and some brokerage firms allow you to open up an account with as little as $2,500 in it to start trading futures. Many firms require more to trade futures, in the range of $5,000 to $10,000.
How Does Day Trading Work?
The process behind day trading is quite simple. First, research your market, the stocks or options you’re considering and the economic state of things. Once you’ve got an idea of how the market is doing on that particular day, you simply invest in whatever stocks, futures or options make the most economic sense. Keep an eye on your investments, selling them once the price has gone up. Sell your inventory within the day as drastic changes can happen overnight and you don’t want to take that risk as a day trader.
Know the W’s of Day Trading
When you’re creating your day trading plan, it’s important to keep in mind the W’s of day trading. First, think about WHAT the market is doing. Is it doing a good job in moving a certain way and establishing a direction for the period? Consider WHEN the market is going to reach various projected levels.
WHERE is the market going? Understand how the market works and you will be able to eventually predict where it will go. Lastly, think about WHY markets, stocks, futures and other assets are acting the way they are. Data is not random, measurements are based upon real life actions. Think about outside and inside influences, consider politics and the economy and research the companies in question.
Advice for Rookies
Starting out as a day trader is no easy task, but the Internet is full of advice to help you along the way. First of all, remember to account for taxes. Earnings are taxed at a personal gains rate, up to 35%. You need to set aside the money to pay for taxes with each and every transaction so that you don’t get behind.
Planning is key when it comes to day trading. Make sure you start by doing a good deal of research into the current state of the market. Then use the research to fuel a plan of attack for future transactions. Let your plan guide you to make good decisions and make sure you stick to it, even if temptation would lead you astray.
Day trading is risky business but the pay-offs can be great. To get started, collect the trading capital you need and start with some intensive research. Consider the capital you have on hand, choosing between futures and securities accordingly. Create a well researched plan and remember to sell efficiently. Always account for taxes and make sure that you keep track of what’s going on in the market and you can start earning through day trading today.
Maxime Rieman is a writer for NerdWallet, where consumers can find a TD Ameritrade Review and other brokerage reviews.
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